INTERVIEW - the Development Bank of Kazakhstan will increase its loan portfolio up to $0.5 bn by 2006

/REUTERS, Astana, Raushan Nurshayeva, October 6, 03/ - State-run Development Bank of Kazakhstan intends to increase its loan portfolio two and half times to $500 mn by 2006m, and to become a major provider of state investment policy by expanding its activities that will include foreign projects. Kambar Shalgimbayev, the President of the bank, said to REUTERS about this fact during interview. According to him, the Board of Directors are reviewing the bank's development strategy to 2006, which assumes such a growth rate. "The major key moments (of the strategy) are that the volume of a loan portfolio will be increased by $500 mn, that is growth rates are significant - meaning $120-140 mn of incremental increase of a loan portfolio per year", he said. The bank created in Spring 2001, by the results of 2002 already occupied 10 percent of total lending by country's banking sector. At the same time, it has already been criticized by private bankers, who believe that bank created on the basis of budget funds for financing long-term projects in non-raw material sector of oil economy of Kazakhstan, invades their territories by financing export operations. According to Shalgimbayev, one third of bank's loans account for export operations, and two thirds - on investment projects with terms up to 20 years. "We are not competing with commercial banks, and this is not our task...If we were financing projects with payback periods of one-two years, yes, we would have crossed their areas. But we are financing projects with weighted-average financing terms of eight years, let them finance for 8 years, but they do not", - he said. Development bank for the purpose of sharing risks attracts commercial banks to finance projects, and their share can be as large as 30 percent. "The Development Bank ...encourages them (banks) to take a part in those projects, which they never would have undertaken due to their abilities and interests", Shalgimbayev said. According to him, the average rate on investment loans of the Development bank is 10.5 percent APR, whereas commercial banks lend funds at not less than 18 percent per annum. From the beginning, the Development bank financed 27 investment projects and export operations for $235.5 mn of total amount. Besides, several project are financed under the bank's guarantees for $15.2 mn. The majority of projects are realized in such industries as food production (49 percent of all projects), development of transport infrastructure - almost 30 percent, textile, tanning and shoe industries - 9 percent, nearly the same percentage falls into projects financing construction materials and equipment and machinery production. One of the bank's projects is the creation of oil and gas infrastructure under the program of support base development of sea operations at Caspian Sea. For erecting a berth, platform and route to Bautino near Kazakhstan oil center - Atyrau - the Development Bank lent $10 mn LOCOMOTIVE The Kazakhstan economy grows by 10 percent annually in average thatnks to investment in oil and gas sector, however, governors of the country want to diversify the economy at the expense of high oil state revenues. For this purpose, besides the Development bank they created Investment and Innovation Funds as well as Corporation on export insuring. "There is a common perception, that Bank in the system of development institutions that were created recently, should occupy thematic, locomotive place, as we have already been created, we are functioning", - Shalgimbayev thinks. At the same time, private bankers and international financial organizations criticized many times the Government of Kazakhstan, suggesting subsidizing of commercial banks' interest rates as a possible way to decrease the cost of loans in non-raw material sector, and thus prejudicing the ability of governmental agency to determine the priority projects. Shalgimbayev is confident that the bank can independently in choose projects for financing, escaping the pressure from outside. "Our activities are regulated by laws. State and other officials are prohibited to intervene it. The system of counterbalance has been created, and t is quite stable", - he said. According to him, the bank will develop gradually, increasing authorized capital, which now equals to $250 mn, by $50 mn per year, and in perspective plans to work abroad, in Russia and China, in particular. "In medium-term perspective we should go abroad not because of vogue... By financing only Kazakhstan economy, not directing it towards technologically aided productions, we deliberately imposing ourselves under sovereign risk", - Shalgimbayev said. [2003-10-06]